AN ECONOMIC OVERVIEW OF THE CALIFORNIA WETFISH INDUSTRY COMPLEX TABLE OF CONTENTS

Transcription

1 AN ECONOMIC OVERVIEW OF THE CALIFORNIA WETFISH INDUSTRY COMPLEX TABLE OF CONTENTS Abstract Section 1: Section 2: Section 3: Section 4: Section 5: Introduction The Economics of Wetfish Capture Fisheries Section 2.a: Combined Ex-Vessel Value Added Section 2.b: Northern Anchovy Section 2.c: Jack and Pacific Mackerel Section 2.d: Pacific Sardines Section 2.e: Market Squid Section 2.f: Coastal Tunas (Bluefin, Skipjack and Yellowfin) and Pacific Bonito The Economics of Wetfish Receiving and Processing in California Section 3.a: Introduction Section 3.b: Market Structure Section 3.b.1: The Market Structure of Receiver/Processors as Buyers of Landed Northern Anchovy Section 3.b.2: The Market Structure of Receiver/Processors as Buyers of Landed Mackerel Section 3.b.3: The Market Structure of Receiver/Processors as Buyers of Landed Pacific Sardines Section 3.b.4: The Market Structure of Receiver/Processors as Buyers of Landed Market Squid Section 3.b.5: The Market Structure of Receiver/Processors as Buyers of Landed Coastal Tunas and Pacific Bonito Section 3.c: Value added by Processors An Overview of the Economics of Distribution and Export Section 4.a: Distribution Section 4.b: Export Sales Industry-Wide Value Added in California Section 6: Section 7: Appendix Section 6.a: Section 6.b: Bibliography Technical Notes Survey Questionnaire Forms Used

2 An Economic Overview of the California Wetfish Industry Complex Steven C. Hackett School of Business and Economics Humboldt State University Assisted by Matthew Krachey Humboldt State University Abstract A key focus of this economic report is to address value added from the harvesting and processing of wetfish in California. Real (inflation-adjusted) value added by fishermen in the wetfish industry complex fluctuates due to both market and environmental conditions, and ranged from a low of $10.5 million in 1992 to a high of $35.8 million in Two-thirds of real fisherman value added was generated from the market squid fishery. Real value added by wetfish fishermen in 2000 represented 29 percent of the total for all landed fish in California. Real value added by processors (many of whom also perform their own distribution and export functions) in 2000 is estimated to range between $37.5 and $90.2 million, with the median estimate being $62.5 million. Based on our median estimate, real processor value added is about twice that of fishermen, a relationship consistent with a recent analysis of the West Coast fishing industry complex by Radtke and Davis (2000) for the Pacific States Marine Fisheries Commission. Export markets are playing an increasingly important role in this industry. Based on our 2001 interviews with processors, most of the fish in this industry is currently processed into a frozen product (cleaned or whole) and exported as bait, feed, seafood, or for further processing. Despite declines in some traditional product forms such as canned fish and fish meal and oil, the real value of all product exports has increased in recent years. In particular, the real value of California exports of wetfish increased by 317 percent between 1989 and 2000, rising to almost $90 million in In contrast, real fisherman value added increased by 88.4 percent in the same time period. In the period between 1989 and 2000, market squid generally represented between two-thirds and three-fourths of the value of total California exports in this industry (with the exception of El Niño years such as 1998). Between 1990 and 2000 the Pacific sardine fishery experienced a remarkable recovery, due to rapid growth in spawning biomass and subsequent increases in harvest quotas. In particular, the share of total real California wetfish export value contributed by Pacific sardines rose from approximately 5 percent in 1990 to almost 25 percent in 2000.

3 Wetfish Economics 2 Section 1: Introduction This report provides an economic overview of the harvesting, receiving, processing, and distribution activities that derive from the commercial harvest of important coastal pelagic fish species in California. These fish species are northern anchovy (Engraulis mordax), jack mackerel (Trachurus symmetricus), Pacific mackerel (Scomber japonicus), Pacific sardine (Sardinops sagax), market squid (Loligo opalescens), various tunas (bluefin (Thunnus orientalis), skipjack (Katsuwonus pelamis), and yellowfin (Thunnus albacares)) and Pacific bonito (Sarda chiliensis). Some of these fish, such as bluefin tuna and bonito, as well as jack mackerel, also support a recreational fishery that is discussed elsewhere (see for example McWilliams and Goldman 1994). The term "wetfish," which is used here to refer to the commercial anchovy, mackerel, sardine, squid, and coastal tuna catch, is an expression that has its origins in how these fish were processed in canneries. Unlike other fish such as tuna that is first cooked then canned, wetfish were first packed in a can "wet" and then cooked (Klingbeil 1992). Even though very little of these fish landed and processed in the present day industry are canned, "wetfish" is still used to describe the industry complex. The overview of commercial fishing and processing in this report includes economic information on market structure characteristics, product prices and quantities, value added, and other trends in the wetfish industry complex between 1981 and Relevant historical information is also provided for fishermen and receiver/processors. As Scherer and Ross (1990) observe, market structure characteristics include the number and size distribution of market participants, the extent to which products are homogeneous or differentiated, and the extent of vertical integration, among other factors. Both concentration ratios and Herfindahl-Hirschman (HH) indices are used to measure market structure. Concentration ratios measure the percentage of total market sales (purchases) by the largest four (C4) or largest eight (C8) sellers (buyers) in a given industry. HH indices measure the sum of squared market shares. Markets with HH indices between 1000 and 1800 are considered moderately concentrated, and index values exceeding 1800 indicate a concentrated market. See the appendix to this report for additional details on measuring market structure. An economic overview of commercial fishing is provided in section 2 of this report. Section 2 is divided into sections for each of the key species or species groups addressed in this study. As will be discussed in greater detail in section 2, the overall trend has been one of growth in landings and inflation-adjusted revenues generated by California fishermen from the early 1980s to The commercial catch is primarily sold to receiver/processors at various ports rather than direct to wholesalers or consumers. In some cases a receiver may serve as an independent intermediary to transport and sell fish to processors. The accompanying socio-economic profile by Pomeroy et al provides a more detailed description of the key California wetfish ports and the methods employed there in handling fish. An economic overview of the receiving/processing industry is provided in section 3 of this report. One aspect of this overview covers current product types. For example, the freezing and storing of whole fish for future sale as bait or animal feed (or for additional processing into seafood products) is an important function performed by large California processors. Other important functions include the processing of fresh and frozen seafood products, and the processing of pet food. Processors also produce smaller quantities of canned, smoked, and other more extensively processed seafood products in California.

4 Wetfish Economics 3 These seafood, bait, animal feed, and other products then move downstream into the wholesale distribution and export market channels. An overview of the wholesale distribution and export stage of production is provided in section 4 of this report. As will be shown in section 4, inflationadjusted revenues from California wetfish exports have increased sharply during the 1990s into Many large processors are vertically integrated into the downstream wholesale distribution and export market functions, while others contract with independent brokers or wholesalerdistributors. Wetfish products reach their end use as seafood products in retail stores, restaurants, and food service operations, as pet food in retail stores, as animal feed in commercial aquaculture, poultry, and other operations, and as bait for commercial and recreational fishermen. While historically a large quantity of these fish were processed as meal, oil, and protein products in the reduction fishery, very little reduction has occurred in California in recent years. The data used in this report come from both primary and secondary sources. Data on vessel landings are derived from existing fish ticket data gathered by the California Department of Fish and Game and archived by the Pacific States Marine Fisheries Commission in their PacFIN database. Each ticket contains information on quantity and revenue for each species of fish landed and sold. Fish tickets also identify the receiver/processors who buy the fish. Data on processed wetfish product types, quantities, revenues, and prices were generated by the authors from surveys and key-informant interviews of receiver/processor industry participants by Pomeroy and Hunter. Examples of survey questionnaires are included in the appendix to this report. Data on export product types, quantities, revenues, and prices are reported annually by the National Marine Fisheries Service. We use these PacFIN and interview data to estimate value added by commercial fishing (section 2) and receiver/processors (section 3), as well as for both combined (section 5). At any given market-mediated stage of production, value added is measured as total revenue generated from sales of the product of that stage of production minus the value added at the previous stages of production (if any). Thus value added at the harvester stage of production in a capture fishery is simply total revenue to the fishermen. In contrast, value added at the processing stage of production (including any integrated wholesale distribution functions) is total revenue from sales of processed fish products minus the value of the fish received from the fishermen. Value added represents income that flows to those who supply the capital, labor, entrepreneurship, and intermediate good and service inputs that are assembled together in production. Value added also includes tax income provided to federal, state, and local government. Note that value added does not necessarily include all of the possible positive and negative economic impacts of commercial fishing. For example, the income to employees of a processing facility is included in value added, but the additional community income generated by workers spending their paychecks at local grocery stores is not. Estimating economic impact requires location-specific income-expenditure multipliers that are not publicly available, or the use of more general multipliers that are inaccurate. Nevertheless by including an estimate of the value added by processors we provide a much more complete economic picture of the commercial fisheries than is provided by ex-vessel revenue alone. Nominal (current dollar) figures are adjusted for inflation using the producer price index for intermediate foods and feeds from the Bureau of Labor Statistics, which uses 1982 as the base year. Subsequent "real" figures are expressed in constant 1982 dollars that eliminate the effects of inflation over time.

5 Wetfish Economics 4 Section 2: The Economics of Wetfish Capture Fisheries The economic information provided in this section of the report covers value added, market trends, and market structure for each species of fish, as well as summary information for the combined fisheries. The accompanying report by Pomeroy describes the gear and techniques employed in the wetfish and related fisheries. Her report also covers the relevant fishery regulations. Before we begin, a number of overall statements can be made about the market structure of the capture fisheries. Our research indicates that there is relatively little vertical integration of the harvesting and the processing stages of production in this industry, implying that most exchanges of fish between vessel and receiver/processor are mediated by price in a market or contractual context. While in some cases the market structure is relatively concentrated, competitive pressures may also derive from relatively easy entry as vessels with valid permits shift from one fishery to the next based on relative prices and the availability of fish. Section 2.a: Combined Ex-Vessel Value Added The trend in real (inflation-adjusted) revenue at the harvester stage of production (real ex-vessel value added) features substantial year-to-year fluctuations, as can be seen in Table 1 and the accompanying Figure 1. With the exception of 1998, an El Niño year with very poor squid landings, the overall trend in the 1990s into 2000 has been one of increasing landings and real growth in value added. The market squid fishery plays a dominant role in the overall data. For example, in 1999 and 2000 squid accounted for more than one-half of total landings and more than two thirds of total real ex-vessel value added. Sardines are once again becoming an important component of the California wetfish fishery complex. Sardines accounted for a bit over one-third of the overall landings in 1999, and about one-eighth of the real ex-vessel value added. Thus taken together, squid and sardines represented 90 percent of overall landings and 91 percent of real ex-vessel value added. A breakdown of landings, market structure, and value-added by species is given below. Note that fish tickets, the source of ex-vessel data used here, report quantity and revenue of landings by specie for a particular vessel. Thus the price per pound information reported below represents average revenue, and is derived by summing revenue and quantity by species by year for all vessel landings in California, and then dividing total revenue by total quantity.

6 Wetfish Economics 5 Table 1: Landings, Ex-Vessel Revenue, and Average Price Per Pound for All Wetfish Landings in California, * Year Total Quantity (lbs) Total Nominal Revenue ($) Total Real Revenue ($)** ,434,660 26,232,430 25,076, ,092,461 22,466,396 22,451, ,683,926 14,845,981 14,330, ,749,932 13,232,173 12,517, ,703,494 15,268,250 15,701, ,755,193 18,269,725 18,996, ,339,680 19,260,972 19,414, ,370,190 24,600,158 22,459, ,596,532 21,749,012 19,104, ,250,336 15,524,419 13,694, ,137,076 15,075,440 13,567, ,045,962 11,587,615 10,462, ,004,226 17,455,110 15,496, ,627,788 23,327,417 20,325, ,622,430 32,656,750 28,446, ,052,079 33,406,768 26,085, ,382,749 32,989,818 26,311, ,490,605 12,897,683 11,100, ,663,455 42,199,631 37,997, ,543,223 40,030,029 35,834, * Source: PacFIN database, Pacific States Marine Fisheries Commission. ** Note: Real revenues were derived by deflating nominal revenues using the producer price index for intermediate foods and feeds (source: U.S. Department of Labor, Bureau of Labor Statistics, Section 2.b: Northern Anchovy History of the Northern Anchovy Fishery of California As Jacobson (1992) reports, landings of northern anchovy in California have featured dramatic fluctuations over the last 80 years. Anchovy landings remained below 5 million pounds from 1916 (earliest reliable landings data) until the 1940s and 1950s following the collapse of the Pacific sardine. Anchovy landings spiked to nearly 20 million pounds in the late 1940s, fell back to less than 5 million pounds for several years, and then spiked to almost 90 million pounds in the early to mid-1950s. Following another decline to approximately 5 million pounds in the early 1960s, landings ranged from 100 to more than 300 million pounds between the late 1960s and the late 1970s (with the exception of a brief falloff in 1978). Recent Trends in the California Northern Anchovy Fishery The reduction fishery has historically targeted northern anchovy, and this fishery has been in a long-term decline since the mid-1970s (California Department of Fish and Game 2000). Jacobson

7 Wetfish Economics 6 (1992, 1993) and Bergen and Jacobson (in press) argue that the California anchovy fishery is constrained by market rather than biological limitations. Specifically, the decline in anchovy landings since 1982 is attributed to declines in fish meal and oil prices, which reduced the prices offered by reduction processors in the anchovy reduction fishery. Since vessels that fish for anchovy have an opportunity cost (the returns from fishing for other wetfish as well as squid and tuna), when anchovy prices fall below fishermen's opportunity costs, effort gets redirected to other fisheries. Thus due to market conditions, very little anchovy has been landed for the reduction fishery since the early 1980s. For example, the California Department of Fish and Game (2000) reports that no anchovy were reduced from 1992 to 1995, and only 7.8 million pounds of anchovy were reduced from 1996 to The Fish and Game report quotes reduction processors as saying in 1999 that reduction is at best a break-even exercise, and as a result few orders are placed and few vessels participate in the anchovy reduction fishery. The bait and feed markets have absorbed most of the landed anchovy in recent years, with smaller quantities going to seafood. Thomson (1990) reports that the prices offered by California fish meal processors during the mid- to late 1980s were only about 33 percent of that offered for menhaden, which supports the dominant U.S. reduction fishery on the Atlantic and Gulf coasts. Thomson states that the reasons for this price disparity are not clear. As the data in Table 2 indicate, anchovy landings declined by 88 percent between 1982 and 1983, a severe El Niño time period, and did not exceed 10 million pounds again until While landings are still only a fraction of those as recently as the early 1980s, they have increased in the late-1990s, and particularly in Analysis of landings data indicate that the top four vessels generated between 50 and 70 percent of total landings in California since the mid-1980s, and the HH indices have ranged between 800 and 1800 (see the appendix for explanatory notes on market structure terms). These data indicate a moderately concentrated industry structure. Prior to the mid-1980s the fishery was less concentrated. For example, in 1981 and 1982 the top four vessels only landed between 25 and 35 percent of the anchovy in California. Value Added in the California Northern Anchovy Fishery As mentioned earlier, total revenue can be interpreted as the value added by fishermen to the products created from the fish that they catch. Table 2 and the accompanying Figure 2 provide real (inflation-adjusted) total ex-vessel revenue from anchovy landings between 1981 and The northern anchovy fishery generated less than a million dollars in real ex-vessel value added in the period between 1983 and Landings increased sharply in 2000, however, pushing real value added to nearly $1.25 million.

8 Wetfish Economics 7 Table 2: Landings, Ex-Vessel Revenue, and Average Price Per Pound for Northern Anchovy in California, * Nominal Ex- Vessel Revenue ($) Real Ex-Vessel Revenue ($)** Nominal Price Per Pound ($) Real Price Per Pound ($)** Quantity Year (Pounds) ,079,660 2,672,001 2,554, ,380,700 1,886,537 1,885, ,714, , , ,287, , , ,459, , , ,334, , , ,051, , , ,252, , , ,292, , , ,052, , , ,202, , , ,175, , , ,311, , , ,857, , , ,142, , , ,385, , , ,192, , , ,188, , , ,384, , , ,899,603 1,395,623 1,249, * Source: PacFIN database, Pacific States Marine Fisheries Commission. ** Note: Real revenues and prices were derived by deflating nominal values using the producer price index for intermediate foods and feeds (source: U.S. Department of Labor, Bureau of Labor Statistics, Section 2.c: Jack and Pacific Mackerel History of the California Mackerel Fisheries Mason (1992) provides an authoritative history of the California mackerel fisheries. She states that the jack mackerel fishery was of minor importance before These fish were referred to as horse mackerel and held little appeal as a canned product. Much of the 400 thousand to 30 million pounds of annual catch in those years was taken in schools mixed with Pacific sardine and the more desirable Pacific mackerel. The jack mackerel fishery developed as a consequence of the collapse of the sardine fishery. Annual landings from 1947 to the late 1980s experienced sharp periodic fluctuations, ranging from 40 to 300 billion pounds, with the largest peak years being in the late 1940s through the early 1950s when the fishery was first exploited. Mason states that many of the fluctuations in jack mackerel landings were related to changing market demand and the relative abundance and market value of other coastal pelagic fish. Peak landings followed

9 Wetfish Economics 8 the collapse of the sardine fishery in the late 1940s and declining catches of Pacific mackerel in the mid-1960s. Konno and Wolf (1992) report that Pacific mackerel (also known as chub or blue mackerel) supported a major cannery fishery in California during the 1930s and 1940s. The cannery fishery was still important into the 1980s, with pet food becoming an important element of the picture (Miller and Vojkovich 1992). Prior to this time Pacific mackerel were caught incidentally in the directed sardine fishery. Pacific mackerel landings peaked in the mid-1930s at approximately 150 million pounds, second only to Pacific sardines in California. Landings fluctuated but generally declined, and eventually collapsed during the late 1960s. A moratorium was placed on the fishery in In 1972 a quota system based on spawning biomass was established, and sufficient biomass existed by 1977 to activate the fishery. Pacific mackerel was the top-ranked finfish by pounds landed in California from 1984 through Recent Trends in the California Mackerel Fisheries The jack mackerel fishery experienced declining landings in California during the 1980s, which then stabilized at considerably reduced levels in the 1990s, as shown in Table 4. Pacific mackerel landings generally held between 33 and 63 million pounds in the 1980s, while in the 1990s there were several years in which Pacific mackerel landings fell below 20 million pounds, as shown in Table 5. Since there have been a great deal more Pacific mackerel landed during this time period, the trend for landings of all mackerel in Table 3 tends to follow the pattern for Pacific mackerel. In recent years Pacific mackerel landings have been influenced by availability and by relative prices. For example, high prices for sardines, market squid, and various tunas will shift effort away from the directed mackerel fishery. According to the California Department of Fish and Game (2000), both availability and relative prices explain why the season closed with 23 percent of the quota (and standing orders from processors) left unfilled. Along these same lines Mason and Bishop (in press) report that the recovery of the Pacific mackerel population in the late 1970s shifted effort away from jack mackerel. Specifically, they argue that the wetfish fleet prefers Pacific mackerel because jack mackerel occur farther from port and tend to aggregate over rocky bottom where there is increased chance of damage to the encircling nets. Declining jack mackerel landings in California during the 1990s can also be attributed to the recovery of the Pacific sardine and increased demand for squid worldwide, both of which have raised the opportunity cost of fishing jack mackerel. In terms of industry structure, while there has been a general trend of increasing concentration among mackerel fishermen in California (a larger share of total landings generated by the top vessels), the industry remains relatively unconcentrated. The associated HH indices for these fisheries have remained below While in the early 1980s the top four vessels landed less than 25 percent of all California Pacific and jack mackerel, by the late-1990s and 2000 the top four vessels landed between 30 and 45 percent of all Pacific and jack mackerel.

10 Wetfish Economics 9 Value Added in the California Mackerel Fisheries In terms of ex-vessel value added in the jack mackerel fishery, the declining landings of jack mackerel, combined with stagnant or declining prices, both contributed to steadily declining exvessel value added in this fishery. Value added in the jack mackerel fishery declined from around $3 million in the early 1980s to less than $250 thousand in 2000, as shown in Table 4 and the accompanying Figure 4. Nominal prices generally declined in the Pacific mackerel fishery, falling from about 9 cents per pound in the early 1980s to between 5 and 6 cents per pound in the late 1990s into Combined with declining landings, Table 5 and Figure 5 show that ex-vessel value added in the Pacific mackerel fishery fell from nearly $6 million in the early 1980s to about $1 million in the late 1990s. In terms of the combined mackerel fishery, real ex-vessel value added declined from $8.5 to $9 million in the early 1980s to less than $3 million in 2000, as shown in Table 3 and the accompanying Figure 3. Meloy et al. (2000) reported that California mackerel fishing was slow despite higher quotas, and that many vessels fished squid rather than mackerel. As a result, California fishermen left a considerable amount of the mackerel quota unfilled in 1998 and 1999.

11 Wetfish Economics 10 Table 3: Landings, Ex-Vessel Revenue, and Average Price Per Pound for All Mackerel in California, * Nominal Ex- Vessel Revenue ($) Real Ex-Vessel Revenue ($)*** Nominal Price Per Pound ($) Real Price Per Pound ($)*** Quantity Year (Pounds)** ,131,237 8,840,030 8,450, ,113,980 9,416,332 9,410, ,566,862 8,545,900 8,248, ,151,178 8,609,405 8,144, ,907,134 7,298,408 7,505, ,635,536 8,290,922 8,620, ,354,812 7,617,830 7,678, ,718,014 8,743,035 7,982, ,076,120 8,672,332 7,617, ,810,210 5,723,724 5,049, ,019,373 5,528,051 4,974, ,715,681 4,137,957 3,736, ,777,852 1,721,947 1,528, ,842,204 1,721,848 1,500, ,669,246 1,353,637 1,179, ,770,926 1,495,141 1,167, ,985,012 2,860,503 2,281, ,560,422 2,801,651 2,411, ,628,252 1,254,300 1,129, ,085,206 3,171,611 2,839, * Source: PacFIN database, Pacific States Marine Fisheries Commission. ** Note: The quantities given above exceed the sum of all jack and Pacific mackerel landings in any given year because of "unidentified mackerel" landings in the PacFIN database that are included in the figures for "all mackerel." ** *Note: Real revenues and prices were derived by deflating nominal values using the producer price index for intermediate foods and feeds (source: U.S. Department of Labor, Bureau of Labor Statistics,

12 Wetfish Economics 11 Table 4: Landings, Ex-Vessel Revenue, and Average Price Per Pound for Jack Mackerel in California, * Nominal Ex- Vessel Revenue ($) Real Ex-Vessel Revenue ($)** Nominal Price Per Pound ($) Real Price Per Pound ($)** Quantity Year (Pounds) ,933,740 2,968,858 2,838, ,767,600 3,292,268 3,290, ,554,402 1,596,845 1,541, ,439,578 1,308,021 1,237, ,043,474 1,196,442 1,230, ,554, , , ,958,232 1,141,690 1,150, ,574, , , ,666,480 1,674,141 1,470, ,087, , , ,730, , , ,796, , , ,747, , , ,997, , , ,830, , , ,853, , , ,728, , , ,391, , , ,240, , , ,797, , , * Source: PacFIN database, Pacific States Marine Fisheries Commission. ** Note: Real revenues and prices were derived by deflating nominal values using the producer price index for intermediate foods and feeds (source: U.S. Department of Labor, Bureau of Labor Statistics,

13 Wetfish Economics 12 Table 5: Landings, Ex-Vessel Revenue, and Average Price Per Pound for Pacific Mackerel in California, * Nominal Ex- Vessel Revenue ($) Real Ex-Vessel Revenue ($)** Nominal Price Per Pound ($) Real Price Per Pound ($)** Year Quantity (Pounds) ,931,700 5,842,183 5,584, ,339,380 2,961,391 2,959, ,517,520 2,805,941 2,708, ,637,900 4,507,376 4,263, ,624,440 3,118,648 3,207, ,027,480 3,444,825 3,581, ,862,480 3,807,031 3,837, ,277,720 5,016,585 4,579, ,084,240 3,312,337 2,909, ,903,920 4,120,058 3,634, ,574,300 5,226,133 4,703, ,917,720 3,900,330 3,521, ,016,320 1,453,461 1,290, ,839,220 1,351,024 1,177, ,838,706 1,071, , ,917,400 1,198, , ,253,240 2,613,914 2,084, ,168,680 2,469,629 2,125, ,387,078 1,066, , ,287,863 2,917,334 2,611, * Source: PacFIN database, Pacific States Marine Fisheries Commission. ** Note: Real revenues and prices were derived by deflating nominal values using the producer price index for intermediate foods and feeds (source: U.S. Department of Labor, Bureau of Labor Statistics, Section 2.d: Pacific Sardines History of the California Pacific Sardine Fishery World War I provided the impetus for developing a large-scale sardine fishery in California. Factors include the curtailment of sardine imports into the U.S. in 1917 and 1918, and the overall scarcity of meat due to wartime demand (Culley, 1971). Pacific sardine landings in California steadily increased to a peak of 1.4 billion pounds in 1936, and averaged approximately 1.2 billion pounds in the period between 1934 and Maximum sustained yield for the subpopulation of Pacific sardines exploited by California fishermen was estimated to be approximately 500 million pounds. During this time the Pacific sardine fishery in California was the largest in the western hemisphere. Management of the fishery at this time was designed to limit the reduction fishery and to promote markets for canned sardine, but overall landings were not regulated (Wolf and Smith, 1992). The fishery collapsed in the late 1940s.

14 Wetfish Economics 13 Wolf and Smith argue that both overfishing and natural changes in the ocean environment contributed to the collapse of the fishery. By 1968, commercial landings of sardines in California were only 142,000 pounds (Murphy, 1966). Between 1967 and 1973 sardine landings were restricted to incidental catch, and a moratorium was imposed by the State of California in 1974 that set a 500,000 pound (250 short ton) incidental take quota and eliminated the use of sardines for dead bait (Wolf and Smith). Sardine landings were below 100,000 pounds in the 1970s up to Recent Trends in the California Pacific Sardine Fishery The sardine moratorium was lifted in 1986, and a modest quota of 2 million pounds (1,000 short tons) was granted. This quota was increased to 16.3 million pounds (8,150 short tons) in Sardine landings increased steadily during the 1980s and 1990s, as shown in Table 6. By 1999 the California sardine quota increased to 260 million pounds (130,000 short tons), and biologists announced that the sardine resource was officially recovered, with estimated spawning biomass exceeding two billion pounds. The Fishery Management Plan for Coastal Pelagic Species sets a sardine harvest guideline that ranges between five and 15 percent of estimated biomass, depending on environmental factors including three-year average sea surface temperature. While fishermen landed only about 132 million pounds of the 260 pound quota in 1999, sardines have been one of the top three commercial species landed in California based on weight between (National Marine Fisheries Service 2001). Kronman (1999) quotes industry sources as saying that ex-vessel prices in 1999 ranged between 3 and 5 cents per pound, with prices as high as 6 cents for premium sardines used for bait by Japanese long line fishermen and as feed for Australian bluefin tuna aquaculture operations. These same sources suggest that supplies of California sardine are influenced by the price of mackerel and squid. In particular, mackerel prices above 7 cents per pound, or squid prices above 15 cents per pound, may result in unfilled sardine quota as fishermen focus on these more valuable fisheries. Bard (2001) quotes industry sources as saying that foreign supplies of sardines from Ecuador and Peru contribute to relatively low ex-vessel prices in California, and thus help explain why California wetfish fishermen have been targeting the higher-value fisheries, leaving much of the sardine quota unfilled. In terms of market structure, expansion of the California sardine fishery since the early 1980s has resulted in a growing number of vessels and thus a trend of decreasing market concentration. While as recently as the mid-1980s the top four vessels landed more than 75 percent of California sardines, that figure had fallen to less than 20 percent by 1999 and HH indices have remained below 500 throughout the 1990s and into 2000, indicating a relatively unconcentrated industry. Value Added in the California Pacific Sardine Fishery The resurgence of the California sardine fishery is illustrated in Table 6 and the accompanying Figure 6. While landings were increasing dramatically in the 1990s, average prices were generally lower than in the 1980s, typically ranging from just below 4 cents per pound to nearly 6 cents per pound. Nevertheless the increase in landings outstripped the decline in prices, and as a

15 Wetfish Economics 14 result real ex-vessel value added sharply increased in the 1990s, rising from less than $200 thousand at the start of the decade to nearly $5 million at the end of the decade. Table 6: Landings, Ex-Vessel Revenue, and Average Price Per Pound for Pacific Sardines in California, * Nominal Ex- Vessel Revenue ($) Nominal Price Per Pound ($) Real Price Per Pound ($)** Year Quantity (Pounds) Real Ex-Vessel Revenue ($)** ,334 2,908 2, , , , ,876 1,415 1, ,412 79,955 83, ,133 60,270 60, ,422, , , ,645, , , ,564, , , ,711, , , ,563,440 1,854,699 1,674, ,828,380 1,544,349 1,371, ,538,220 1,509,850 1,315, ,617,140 3,549,953 3,092, ,674,760 3,150,524 2,460, ,894,700 4,386,289 3,498, ,599,160 3,566,975 3,069, ,584,960 5,278,509 4,752, ,300,757 5,471,730 4,898, * Source: PacFIN database, Pacific States Marine Fisheries Commission. ** Note: Real revenues and prices were derived by deflating nominal values using the producer price index for intermediate foods and feeds (source: U.S. Department of Labor, Bureau of Labor Statistics, Section 2.e: Market Squid History of the California Market Squid Fishery The fishery for California market squid was established by ethnic Chinese fishermen and centered in the Monterey Bay region in the nineteenth century. These fishermen used skiffs with a lighted torch in the bow to attract squid, which were then captured in an encircling purse seine (Pomeroy and FitzSimmons 2001). According to Dickerson and Leos (1992), ethnic Italian fishermen using lampara nets took control of the fishery in the early years of the 20 th century. Prior to the Great Depression the fishery was driven by an export market for sun-dried squid in China. Development of a domestic market for canned and frozen squid began in the 1920s and

16 Wetfish Economics 15 eventually came to support the fishery. Kato and Hardwick (1975) report that receiver/processors of frozen squid paid higher prices than canneries, and thus canners received the excess beyond the processing capacity of the freezer plants. By the 1970s most of the frozen and canned squid was exported to Europe, with significant amounts of frozen squid also being used as bait in commercial and recreational fisheries. The fishery experienced large fluctuations in landings, with peak landings of 38 million pounds in 1946, diminished landings of 2.5 million pounds in 1960, peak landings of nearly 52 million in 1981, and diminished landings of 1.2 million pounds in While the squid fishery was traditionally centered on the Monterey Bay region, a southern California fishery began developing in the early 1960s that after the El Niño exceeded the landings of the Monterey bay wetfish fleet (Kato and Hardwick 1975, Pomeroy and FitzSimmons 2001). Recent Trends in the California Market Squid Fishery Market squid is one of the most valuable commercial fisheries in California. According to the National Marine Fisheries Service (2001), market squid was the top commercial marine species landed in California in 1997, 1999, and 2000 based on ex-vessel revenue, and was second in 1995 and Moreover, market squid was the top commercial species in California based on weight in (with the exception of 1998). As shown in Table 7, while landings of market squid fluctuated a great deal in the 1980s and 1990s, there was a broad trend of increasing landings. Vojkovich (1998) gives several reasons for the increased volume of squid landings in California, with perhaps the most important factor being a growing export market for California squid in China. Sonu (1993) argues that growth in the export market for squid in the early 1990s was fueled by the expanding global economy combined with a shortfall in squid supplies from the Falkland Islands, Japan, and New Zealand. A second reason given for the increased volume of squid landings in California given by Vojkovich is the increase in fishing effort in southern California. Ocean conditions also have an important impact on the abundance of market squid. Vojkovich provides evidence that El Niño events have a negative impact on squid landings. One can see in Table 7, for example, that the California squid catch declined sharply during the strong El Niño years of and The years following El Niño events often feature a strong rebound in squid landings, such as in 1985 and again in Pomeroy and Fitzsimmons (1998) report that the number of vessels fishing squid off southern California doubled between 1994 and 1996, with the increase attributable to factors such as strong demand and prices, and limited entry and/or declines in other fisheries on the west coast of the United States. The market structure of the squid fishery in California is relatively unconcentrated. In general the top four vessels landed less than 30 percent of the total since In 1999 and 2000 the top four vessels landed less than 15 percent of the total. Pomeroy and FitzSimmons (2001) report that most squid fishing is done by order from processors, and vessels that fish squid have established relationships with a single processor. Yaremko (in press) reports that in 1999 and 2000 squid processors generally limited the daily catch from vessels to 30 short tons to prevent supply from exceeding demand.

17 Wetfish Economics 16 Value Added in the California Market Squid Fishery There was also a great deal of fluctuation in average prices received by squid fishermen in the 1980s and 1990s, as shown in Table 7. As supply/demand theory would suggest, prices increased in years where supply sharply decreased, and vice versa. For example, Bard (2000) reported that record landings in late 1999 and 2000 stressed freezer storage capacities and depressed squid prices (which one can see in Table 7). Other major factors affecting squid prices are export demand, foreign supplies, and restraints on foreign trade. Bard attributes part of the decline in 2000 squid prices to the 45 percent tariff on squid imports imposed by China. Moreover, Bard reports that European consumers prefer relatively large squid when available, and so smaller California squid may have difficulty penetrating the European market when larger squid are abundant. Industry sources report that some California processors produce unique retail packaging and product forms that serve niche markets in Europe. On a per-pound basis squid has been one of the more valuable species caught by round-haul gear in California, with vessel prices by the mid-1990s several times higher than for anchovy, mackerel, and sardines. Vojkovich (1998) reports that squid increased from the number three fishery (in terms of ex-vessel value) in California in 1993, to most valuable fishery in California in Real ex-vessel value added by squid fishermen ranged from less than $300 thousand in 1984 (at the end of a particularly sharp El Niño event) to a high of nearly $30 million in 1999, as shown in Table 7 and the accompanying Figure 7. Both larger landings and (in the mid- and late 1990s) somewhat higher prices contributed to a general trend of higher ex-vessel value added in the 1990s. With the exception of 1998, where squid landings declined by almost 96 percent relative to 1997, real ex-vessel value added by squid fishermen ranged from $ million in the period from 1993 to 2000.

18 Wetfish Economics 17 Table 7: Landings, Ex-Vessel Revenue, and Average Price Per Pound for Market Squid in California, * Nominal Ex- Vessel Revenue ($) Nominal Price Per Pound ($) Real Price Per Pound ($)** Real Ex-Vessel Year Quantity (Pounds) Revenue ($)** ,829,720 5,078,052 4,854, ,953,360 3,611,908 3,609, ,020, , , ,243, , , ,654,920 3,971,811 4,084, ,908,620 4,517,357 4,697, ,056,900 3,954,933 3,986, ,082,360 7,623,893 6,960, ,134,660 7,525,570 6,610, ,714,440 4,731,736 4,174, ,426,960 6,073,319 5,465, ,902,800 2,448,368 2,210, ,422,600 10,269,533 9,116, ,098,320 14,332,696 12,488, ,076,520 22,299,941 19,425, ,605,540 21,862,182 17,070, ,515,340 19,961,571 15,920, ,377,012 1,622,664 1,396, ,762,200 33,277,105 29,963, ,038,363 27,070,605 24,233, * Source: PacFIN database, Pacific States Marine Fisheries Commission. ** Note: Real revenues and prices were derived by deflating nominal values using the producer price index for intermediate foods and feeds (source: U.S. Department of Labor, Bureau of Labor Statistics, Section 2.f: Coastal Tunas (Bluefin Skipjack, and Yellowfin) and Pacific Bonito History of the California Coastal Tuna and Pacific Bonito Fisheries Bayliff (1992a) reports that a sport fishery for bluefin tuna in California began in 1898, while the commercial fishery began in Bluefin landings in California have fluctuated a great deal. Peak landings between the late 1920s and the early 1970s ranged between 20 and 35 million pounds annually. In this same period annual landings occasionally fell to 2 million pounds or less. From the 1970s to current times there was a broad downward trend that is discernable in the annual fluctuations of bluefin tuna landings in California. Wild (1992) states that the development of California fisheries for yellowfin and skipjack tunas resulted from sharply reduced sardine landings in While much of the early cannery fishery was supplied by albacore, a collapse of the albacore fishery in the mid to late-1920s shifted the cannery fishery to yellowfin and skipjack tuna. Peak landings of yellowfin in California occurred

19 Wetfish Economics 18 in the late 1940s through the late 1970s, with landings ranging from 100 million to nearly 300 million pounds. Wild describes the transition that took place in the California tuna fishery from the 1970s to the early 1990s, a summary of which is given here. At its peak the California tuna fishery employed 2000 fishermen and an additional 6000 workers at canneries, boat building, and repair facilities, primarily in Southern California. Wild reports that between 1982 and 1984 the major California tuna canneries focused their production outside of the continental United States. Industry sources indicate that the departure of tuna canneries from California was precipitated by a number of factors, perhaps the most significant of which was the pressure to remain competitive with growing imports of low-priced water-packed canned tuna, primarily from Thailand. Wild states that during the early 1980s the number of bait boats and purse seiners fishing the eastern Pacific declined by approximately one-half (from 184 vessels in the 1970s to 74 during the late 1980s). He goes on to report that by the late 1980s approximately 75 percent of the purse seiners registered in California were fishing the western Pacific and transshipping or unloading their catches to canneries in Asia, American Samoa, and various ports in Central and South America, as well as Puerto Rico. Pacific bonito supports a large recreational fishery along with a commercial fishery, and Miller and Vojkovich (1992) report that the recreational fishery for bonito began with the expansion of the commercial passenger fishing vessel fleet after World War II. Commercial landings of bonito have experienced very large fluctuations, ranging between 120 thousand and more than 30 million pounds per year. As with the tuna fisheries in California, bonito landings generally declined in the 1980s and 1990s relative to harvest levels in the late 1960s and 1970s. Recent Trends in the California Coastal Tuna and Bonito Fisheries Table 8 shows recent trends in the combined "coastal tuna" fisheries. Landings in the overall fishery are far below historical levels, and feature considerable year-to-year fluctuations. The constituent elements of these trends are described below. Commercial bluefin tuna landings dropped off considerably in the 1980s and 1990s relative to landings between the mid-1950s and the late 1970s. Bluefin landings also experienced substantial fluctuations during the 1980s and 1990s, as shown in Table 9. Bluefin is a highly valuable fish, as indicated by the high average prices per pound shown in Table 9. Industry sources indicate that in the late 1980s the San Pedro purse seine fleet caught very large bluefin tuna that were subsequently sold fresh into the Japanese seafood market and brought exceptionally high prices. While average nominal prices generally remained stable throughout the period, average prices received by fishermen were especially high in 1999, likely a response to low supplies of bluefin (1999 was a year in which landings had declined by nearly 93 percent from those of 1998). Commercial landings of Pacific bonito fluctuate a great deal, but generally declined in the 1990s relative to the 1980s (and relative to commercial landings in the late-1960s and 1970s), as shown in Table 10. The great bulk of the bonito landings in California occur in the recreational fishery (Smiley et al. in press) was a particularly poor year for bonito landings. Yellowfin and skipjack tuna landings in California dropped considerably in the early 1980s in response to the sharp reduction in the California cannery market. As with the other tunas, yellowfin and skipjack landings fluctuated considerably in the 1980s and 1990s, as shown in Tables 11 and 12. While